The acquisition and collection of charged-off credit card debt is a big business.
During 2011, the five largest debt buyers alone purchased $51 billion face value of charged-off credit card debt directly from card issuers. The debt buying industry has a high rate of revenue growth, is highly profitable, has low barriers to entry and is one of the most attractive segments of the Asset Recovery Management industry.
Additionally, the industry has achieved significant recognition as a great investment vehicle. The major companies not only purchase very large quantities of charged-off credit card debt directly from major banks, but they are financed by lending syndicates headed by these major banks:
- JP Morgan Chase administers a $100 million revolving credit facility and a $150 million term loan for Asset Acceptance Capital Corp.
- Portfolio Recovery Associates recently announced the close of a $600 million credit facility to fund business operations and expansion. Bank of America Merrill Lynch led arrangements for the facility with Wells Fargo Securities and SunTrust Bank
- NCO Group has a $569 million term loan and $100 million revolving loan administered by Morgan Stanley
The unique market opportunity for Ropay is to be able to readily purchase non-performing assets because the card issuers selling the charged-off debt are narrowing their selection of “preferred” agencies due to the increasing number of penalties and fines for collection agency violations.
Of even more concern to the card issues are the number of debt buyer/collection agencies finding themselves in hot water with the various state Attorneys General. The turmoil in the industry offers tremendous opportunities for debt buyers who adhere strictly to state and federal laws and treat consumers with dignity and respect.
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